ECON Test 1&2

d) perfectly elastic.

When the absolute value of the price elasticity of demand is infinite, demand is: a) inelastic. b) elastic. c) perfectly inelastic. d) perfectly elastic.

a) shifted right; is unchanged

Gabriella starts using a new baking technique, and she can now do twice as much of everything. In a single day, Gabriella can now bake 10 muffins or eight cookies, rather than the five muffins and four cookies she could previously bake. Gabriella's production possibility frontier has _____, and her opportunity cost of making cookies _____. a) shifted right; is unchanged b) shifted right; has decreased c) not changed; has increased d) not changed; has decreased

individual supply curve

A graph plotting the quantity of an item that a business plans to sell at each price.

sunk cost

A cost that has been incurred and cannot be reversed. A sunk cost exists whatever choice you make, and hence it is not an opportunity cost. Good decisions ignore sunk costs.

-3.28

Blake eats two bags of generic potato chips each day. When Blake's hourly wage increases from $8 to $15, he decides to stop eating generic potato chips and starts eating a name brand potato chip. Use the midpoint method to calculate Blake's income elasticity of demand for generic potato chips. Round your answer to two decimal places. income elasticity of demand for generic potato chips:

Budget Line Equation

P1X1+P2X2=money income

Percentage change in price (midpoint)

P2-P1/(P1+P2/2)x 100

cost?

sellers having an increasing marginal

marginal cost curve

shows how the cost of producing one more unit depends on the quantity that has already been produced

price taker

Someone who decides to charge the prevailing price and whose actions do not affect the prevailing price.

tradeoffs

The sacrifice of some or all of one economic goal, good, or service to achieve some other goal, good, or service.

a) government-designated burden of a tax payment.

The statutory burden of a tax is the: a) government-designated burden of a tax payment. b) percentage increase in the tax on an item. c) laws governing sales taxes in a country. d) burden created by the change in after-tax prices faced by buyers and sellers.

d) scarcity

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of: a) inefficiency b) equilibrium c) inequity d) scarcity

law of demand

The tendency for quantity demanded to be higher when the price is lower.

law of supply

The tendency for the quantity supplied to be higher when the price is higher.

Consumer Choice Theory

The theory relating consumer demand curves to consumer preferences.

total revenue

The total amount you receive from buyers, which is calculated as price × quantity.

economic surplus

The total benefits minus total costs flowing from a decision.

opportunity cost

The true cost of something is the next best alternative you have to give up to get it.

fixed costs

Those costs that don't vary when you change the quantity of output you produce.

variable costs

Those costs—like labor and raw materials—that vary with the quantity of output you produce.

less

if demand is elastic, a higher price yields _____ revenue?

more

if demand is inelastic, a higher price yields _____ revenue?

relatively flat supply curve

if price elasticity of supply is elastic, what does the graph look like?

relatively steep supply curve

if price elasticity of supply is inelastic, what does the graph look like?

horizontal supply curve

if price elasticity of supply is perfectly elastic, what does the graph look like?

vertical supply curve

if price elasticity of supply is perfectly inelastic, what does the graph look like?

inferior goods

income elasticity of demand when it's negative?

rational fule for markets

marginal benefit = marginal cost

rational rule for buyers

marginal benefit = price

rational rule for sellers

marginal cost = price

Bang for your buck

marginal utility/ price

marginal revenue

the additional income from selling one more unit of a good; sometimes equal to price

marginal cost

the cost of producing one more unit of a good

larger

the elasticity of supply is ____ in the following circumstances: for firms that store inventories, when inputs are easily available, for firms with extra capacity, when firms can easily enter and exit markets, and when there's more time to adjust

marginal utility

the extra satisfaction a person obtains from consuming one more unit of a good or service

c) a fall in the price of the item.

(Figure: Graph) In the graph, the movement from point J to point K must have been caused by: a) an increase in the total supply of the item. b) a rise in the price of the item. c) a fall in the price of the item. d) a decrease in the total supply of the item.

does not shift

1. A 2014 study conducted by Yahoo! revealed that chocolate is the most popular flavor of ice cream in America. a. Suppose a severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream. Indicate the possible effects on demand, supply, or both, as well as the equilibrium price and quantity of chocolate ice cream. the demand curve for chocolate ice cream?

increase

1. A 2014 study conducted by Yahoo! revealed that chocolate is the most popular flavor of ice cream in America. a. Suppose a severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream. Indicate the possible effects on demand, supply, or both, as well as the equilibrium price and quantity of chocolate ice cream. the equilibrium price of chocolate ice cream?

decreases

1. A 2014 study conducted by Yahoo! revealed that chocolate is the most popular flavor of ice cream in America. a. Suppose a severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream. Indicate the possible effects on demand, supply, or both, as well as the equilibrium price and quantity of chocolate ice cream. the equilibrium quantity of chocolate ice cream?

shift to the left

1. A 2014 study conducted by Yahoo! revealed that chocolate is the most popular flavor of ice cream in America. a. Suppose a severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream. Indicate the possible effects on demand, supply, or both, as well as the equilibrium price and quantity of chocolate ice cream. The supply curve for chocolate ice cream?

determinants of the market supply of a good

expectations about the future, production costs (input prices), market size ( 3 of firms), prices of related outputs, technology (productivity)

an inferior

for most consumers, a 10-year old used car is a _____ good.

a normal

for most normal consumers, dental services are ______ good.

relatively flat demand curve

how does the graph look?: elastic demand

horizontal demand curve

how does the graph look?: perfectly elastic demand

the law of supply

the quantity supplied is higher when the price is higher, The marginal cost of production increases as quantity increases

Marginal Rate of Substitution (MRS)

the rate at which a consumer would be willing to trade off one good for another

utility

the satisfaction experienced from consuming a good or service

Consumer Theory

the study of how people decide what to spend their money on given their preferences and their budget constraints

market clearing

An assumption that prices are flexible, adjust to equate supply and demand.

a) when the quantity supplied equals the quantity demanded.

An equilibrium in a market occurs: a) when the quantity supplied equals the quantity demanded. b) when suppliers have sold all the goods and services that they have produced. c) at the halfway point on a demand curve. d) at the halfway point on the price axis.

law of diminishing marginal product

As a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes.

The economic burden of a tax

Is the buyer or seller more impacted by the price change that results from the tax? Who is more impacted by the tax? How much is that impact being felt

Statutory Burden of a Tax

Is the buyer or the seller responsible for sending the tax payment to the government? Who is responsible for paying the tax?

b) included; nonfinancial

Jonathan Mendez is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is ____ in his opportunity cost calculations and represents a _____ cost. a) not included; financial b) included; nonfinancial c) included; financial d) not included; sunk

$1

The budget set, or budget constraint, in the graph shows the possible combinations of brownies and ice cream cones that can be purchased. Assume that this person has a total of $18 to spend on brownies and ice cream cones. How much does a brownie cost?

economic burden

The burden created by the change in after-tax prices faced by buyers and sellers.

statutory burden

The burden of being assigned by the government to send a tax payment.

tax incidence

The division of the economic burden of a tax between buyers and sellers.

b) burden created by the change in after-tax prices faced by buyers and sellers.

The economic burden of a tax is the: a) laws governing sales taxes in a country. b) burden created by the change in after-tax prices faced by buyers and sellers. c) government-designated burden of a tax payment. d) percentage increase in the tax on an item.

change in demand

The entire relationship between price and quantity for a good; A set of prices/quantities that consumers are willing to buy

relatively steep demand curve

how does the graph look?: inelastic demand

vertical graph

how does the graph look?: perfectly inelastic demand

price elasticity of demand

A measure of how responsive buyers are to price changes. It measures the percent change in quantity demanded that follows from a 1% price change.

price elasticity of supply

A measure of how responsive sellers are to price changes. It measures the percent change in quantity supplied that follows from a 1% price change. % change in quantity supplied/ % change in price

income elasticity of demand

A measure of how responsive the demand for a good is to changes in income. It measures the percent change in quantity demanded that follows from a 1% change in income. % change in quantity demanded/ % change in income

cross-price elasticity of demand

A measure of how responsive the demand of one good is to price changes of another. It measures the percent change in quantity demanded that follows from a 1% change in the price of another good. % change in quantity demanded/ % change in price of another good

quantity regulation

A minimum or maximum quantity that can be sold.

price floor

A minimum price that sellers can charge.

a) the relative satisfaction, enjoyment, or contentment a person receives from consuming a good or service.

Utility is the measure of a) the relative satisfaction, enjoyment, or contentment a person receives from consuming a good or service. b) surplus lost by consumers when taxes are introduced to the market. c) surplus lost by producers when taxes are introduced to the market. d) the satisfaction all consumers should receive from consuming a good or service.

a) vary with the quantity of output produced.

Variable costs are the costs that a) vary with the quantity of output produced. b) are incurred to build factories and assembly plants. c) are independent of the amount of output produced. d) stay fixed with the quantity of output produced.

framing effect

When a decision is affected by how a choice is described, or framed. You should avoid framing effects altering your own decisions.

congestion effect

When a good becomes less valuable because other people use it. If more people buy such a product, your demand for it will decrease.

network effect

When a good becomes more useful because other people use it. If more people buy such a good, your demand for it will also increase.

normal good with inelastic income

When income elasticity of demand is less than 1 and greater than 0 there is a?

inferior good

When income elasticity of demand is negative there is a?

normal good

When income elasticity of demand is positive and greater than 0 it is a?

perfectly inelastic

When quantity does not respond at all to a price change.

Invisible Hand Theory

When self-directed gain leads to social and economic benefits for the whole community.

elastic

When the absolute value of the percent change in quantity is larger than the absolute value of the percent change in price, which means that the absolute value of the price elasticity is greater than 1.

inelastic

When the absolute value of the percent change in quantity is smaller than absolute value of the percent change in price, which means that the absolute value of the price elasticity is less than 1.

a) elastic.

When the absolute value of the price elasticity of demand is greater than 1, demand is: a) elastic. b) unit elastic. c) perfectly inelastic. d) inelastic.

d) inelastic.

When the absolute value of the price elasticity of demand is less than 1, demand is: a) perfectly elastic. b) unit elastic. c) elastic. d) inelastic.

a) large; a smaller share

When the price elasticity of demand is _____ relative to the price elasticity of supply, then buyers bear _____ of the economic burden of a tax. a) large; a smaller share b) large; a bigger share c) small; all d) small; none

shortage

When the quantity demanded exceeds the quantity supplied.

surplus

When the quantity demanded is less than the quantity supplied.

not in equilibrium, people are still willing and able to purchase gasoline, even though the quantity supplied has been exhausted.

When you arrive at a gas station, there is a line of cars wrapped around the block waiting for gas, so you go to the gas station down the road only to find another line of cars! You get in line and end up waiting over an hour just to get to the pump and be told that they've run out of gas. This market is ________ because _________.

c) only variable costs.

When you calculate marginal costs, they should include: a) both the variable and fixed costs. b) only fixed costs. c) only variable costs. d) the market price of the product.

a) original paintings made by Leonardo Da Vinci

Which example best represents perfectly inelastic supply? a) original paintings made by Leonardo Da Vinci b) a restaurant willing to cater any number of dishes if the price is greater than $10 a plate c) a good with no substitutes in consumption d) the market for collectible trading cards

a) (i), (iii), and (iv)

Which of the following are correct about fixed costs?(i) They do not change with the level of production in the short run.(ii) They include variable costs.(iii) They are present even when the firm is producing zero units.(iv) They are irrelevant to marginal cost. a) (i), (iii), and (iv) b) (ii) and (iv) c) (i), (ii), and (iii) d) (i), (ii), (iii), and (iv)

B and D

Which of the following are price ceilings? a) the minimum wage b) rent control c) an agricultural price support d) price controls on prescription drugs

B and C

Which of the following are price floors? a) price controls on staples, e.g., bread b) an agricultural price support c) a minimum unit price on alcohol d) rent control

c) technological advance in production techniques

Which of the following events would lead to a shift of the supply curve from Old supply to New supply? a) increased taxation of raw materials used by producers b) a decrease in the size of the market c) technological advance in production techniques d) a natural disaster that causes a shutdown of production

a) The market price of a product.

Which of the following is NOT a factor that can shift supply? a) The market price of a product. b) The price of a complement-in-production. c) The expected future price of a product. d) The price of a substitute-in-production.

a) A city enforces zoning laws that restrict the number of housing units.

Which of the following is an example of a quantity quota? a) A city enforces zoning laws that restrict the number of housing units. b) A city sets a limit on the maximum rent that tenants pay. c) A city awards a construction firm a monopoly over all public housing construction. d) A city imposes a tax on all people who move into the city.

c) A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in-production.

Which of the following lists only the factors that would cause a decrease in the supply of an item? a) A fall in input prices; an increase in productivity; a fall in the price of a substitute-in-production. b) A rise in the price of a substitute-in-production; a rise in the price of a complement-in-production; an expectation that the price of the item will rise in the future. c) A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in-production. d) A decrease in the number of sellers in the market; a fall in the price of a complement-in-production; an increase in productivity.

c) The opportunity cost principle.

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a) The cost-benefit principle. b) The interdependence principle. c) The opportunity cost principle. d) The marginal principle

"holding other things constant"

A commonly used qualifier noting your conclusions may change if some factor that you haven't analyzed changes. (In Latin, it's ceteris paribus.)

c) Diminishing marginal product

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes per day. What concept does this scenario illustrate? a) The marginal principle b) The opportunity cost principle c) Diminishing marginal product d) The cost-benefit principle

quotas

A limit on the maximum quantity of a good that can be sold.

the budget line

A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices.

utility

Ability or capacity of a good or service to be useful and give satisfaction to someone.

a) should consume more brownies and fewer ice cream cones.

Assume that at point A, the marginal utility from a brownie is 10 and the marginal utility for an ice cream cone is 18. This person a) should consume more brownies and fewer ice cream cones. b) is utility maximizing. c) should consume more ice cream cones and fewer brownies.

there would be a surplus, is less than

At a price of $6.00 per gallon, ________ as the amount of gasoline people are willing and able to buy ________ the amount of gasoline gas stations are willing and able to sell.

the rational rule for buyers

Buy more of an item if the marginal benefit of one more is greater than (or equal to) the price.

b) demand is more elastic than supply.

Buyers bear a smaller incidence of the tax when: a) the tax is higher. b) demand is more elastic than supply. c) demand is perfectly inelastic. d) supply is more elastic than demand.

someone else's shoes technique

By mentally "trading places" with someone so that you understand their objectives and constraints, you can forecast the decisions they will make.

capitalism

Capital (means of production) is privately owned; Social programs are possible under capitalism through taxation

pure command economy

Central authority allocated resources by executive decision; Focus on equity

a) 20 million gallons per week

Consider the data in the table. The price of gasoline is $3.99 per gallon at the gas station. If Rexhall Fuel Supplies is a rational seller, how many gallons of gasoline should this seller be willing to sell? a) 20 million gallons per week b) 14 million gallons per week c) 30 million gallons per week d) 42 million gallons per week

d) An increase in the price of a ticket will not cause a decrease in demand, but rather a decrease in quantity demanded.

Consider the following statement: "An increase in the cost of oil will cause the price of a plane ticket to increase. This increase in price will cause a decrease in demand for airline travel and a leftward shift in the demand curve." What is the flaw of this reasoning? a) A decrease in demand will shift the curve rightward, not leftward. b) The increase in the cost of oil will cause a decrease in the price of a plane ticket. c) The cost of oil affects supply and not demand so prices of tickets will remain the same. d) An increase in the price of a ticket will not cause a decrease in demand, but rather a decrease in quantity demanded.

a) more elastic.

Consider the statements regarding elasticity. Demand for a luxury item tends to be a) more elastic. b) perfectly inelastic. c) less elastic.

b) more elastic.

Consider the statements regarding elasticity. Demand for an item that uses a large portion of your budget tends to be a) perfectly inelastic. b) more elastic. c) less elastic.

c) more elastic.

Consider the statements regarding elasticity. Over longer periods of time, demand tends to be a) less elastic. b) perfectly inelastic. c) more elastic.

c) less elastic.

Consider the statements regarding elasticity. With fewer substitutes, demand tends to be a) perfectly inelastic. b) more elastic. c) less elastic.

A and D

Consider your current uses of tap water. Think about some of the ways that you use water that are beyond what is necessary to sustain life.: If the price of tap water triples, what are some likely changes that you will make to your consumption of tap water? a) decrease the length of your showers b) leave water running while brushing your teeth c) increase the length of your showers d) turn water off while brushing your teeth

cost-benefit principle

Costs and benefits are the incentives that shape decisions. You should evaluate the full set of costs and benefits of any choice, and only pursue those whose benefits are at least as large as their costs.

marginal principle

Decisions about quantities are best made incrementally. You should break "how many" questions into a series of smaller, or marginal decisions, weighing marginal benefits and marginal costs.

price elasticity of demand

ED= % change in quantity demanded/ % change in price= %ΔQD/%ΔP

price elasticity of demand and a straight line

ED= change in quantity/ change in price x average price/ average quantity

Income Elasticity of demand

EI=% change in quantity demanded/ % change in income

inelastic

ES< 1

price elasticity of supply equation

ES=% change in quantity supplied/ % change in price= % ΔQs/%ΔP>0

elastic

ES> 1

Cross-price elasticity of demand (XED)

EXD:% change in quantity demanded of Good A/ % change in Price of Good B

diminishing marginal benefit

Each additional item yields a smaller marginal benefit than the previous item.

market economies

Each individual makes their own production and consumption decisions, buying and selling in markets.

normal

For most consumers, the newest iPhone is a ___________ good.

complements in production

Goods that are made together. Your supply of a good will increase if the price of a complement-in-production rises.

complementary goods

Goods that go together. Your demand for a good will decrease if the price of a complementary good rises.

substitute goods

Goods that replace each other. Your demand for a good will increase if the price of a substitute good rises

Quantity Restrictions

Governments can impose quantity restrictions on things like drugs and taxi cabs in NYC with methods like laws and licenses

socialism

Governments own the means of production and direct its use; Socialism is not the same thing as "social programs"

c) Graph 2

Graph 1 and Graph 2 illustrate two different production possibility frontiers for making cars and trucks. Which graph illustrates that shifting resources from making cars to making trucks will result in increasing opportunity costs? a) Both graphs illustrate increasing opportunity costs. b) Neither graph illustrates increasing opportunity costs. c) Graph 2 d) Graph 1

b) at prices below the equilibrium price.

Graphically, shortages will always occur: a) at prices above the equilibrium price. b) at prices below the equilibrium price. c) when the quantity supplied exceeds the quantity demanded. d) at the equilibrium price.

1.5

If Good C increases in price by 20% a pound, and this causes the quantity demanded for Good D to increase by 30%, what is the cross-price elasticity of the two goods? Round your answer to one decimal place.

rational rule

If something is worth doing, keep doing it until your marginal benefits equal your marginal costs.

d) it will lose customers to the cheaper station across the street.

Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price. If one station increases its price, a) it will be fined by the government. b) it will make a higher profit. c) it will sell more gasoline. d) it will lose customers to the cheaper station across the street.

c) consumers view gasoline from different gas stations as perfect substitutes.

Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price. a. The most likely reason that the price is the same is that a) gas stations always make a profit, so they can charge any price they want. b) drivers need gas and are willing to pay whatever price a gas station charges. c) consumers view gasoline from different gas stations as perfect substitutes. d) government regulation requires both gas stations to charge the same price.

b) Netflix is a normal good.

In 2015, Netflix increased its monthly price for new subscribers by $1. In response, one individual tweeted the following: "So tired of being a college student. Can't wait until I have a stable job and won't have to give up Netflix cause they raised their price by $1". What does this statement indicate about the income elasticity of demand for Netflix? a) Netflix is a perfectly inelastic good. b) Netflix is a normal good. c) Netflix violates the law of demand. d) Netflix is an inferior good.

b) the buyer and the seller

In a voluntary economic transaction between a buyer and a seller, _____ can earn economic surplus from the transaction. a) only the buyer b) the buyer and the seller c) only the seller d) neither the buyer nor the seller

b) surplus, fall

In each of the following scenarios, the market is initially in equilibrium. Determine the impact each event would have on the given market. a. New advances in recycling technology reduce the cost of producing paper made from recycled material. 2. Will the advancement in recycling technology result in a shortage or surplus of paper made from recycled material at the previous price? Will the price of paper made from recycled material rise or fall? a) shortage, fall b) surplus, fall c) shortage, rise d) surplus, rise

willingness to pay

In order to convert nonfinancial costs or benefits into their monetary equivalent, ask yourself: "What is the most I am willing to pay to get this benefit (or avoid that cost)?"

c) 50,50

In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The incidence of the tax on the buyer is ____ % and the incidence of the tax on the seller is _____ %. a) 100, 0 b) 70, 30 c) 50,50 d) 20,80

c) 50,50

In the market for plastic bags shown here, the original equilibrium price is 50 cents per bag. In an effort to reduce plastics usage, a tax is then placed on the buyers of plastic bags. The incidence of the tax on the buyer is ____ % and the incidence of the tax on the seller is _____ %. a) 40, 60 b) 60, 40 c) 50,50 d) 20,80

$6, 350

In this labor market, the equilibrium wage is ______ , and the equilibrium quantity of workers hired is _______

c) $4

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte? a) $2 b) $6 c) $4 d) $1

three factors of production

Land (T), Labor (L), Capital (K)

0.41 and normal good

Lauren's salary decreases from $34,000 to $30,000 . She decides to reduce the number of outfits she purchases each year from 20 to 19. Use the midpoint method to calculate the income elasticity of demand for new outfits and classify what type of good is clothing for Lauren? Round your answer to two decimal places. income elasticity:

0.25

Lauren's salary decreases from $37,000 to $30,000. She decides to reduce the number of outfits she purchases each year from 2020 to 1919. Use the midpoint method to calculate the income elasticity of demand for new outfits. Round your answer to two decimal places.

MRS equation

MUx/MUy

decrease, increase

Maria is an industrial engineer at a Nissan plant. Indicate how Maria should change her production plans in response to each change in market conditions. An engine supplier decreases the price it charges Nissan by 50%. As a result, Nissan's cost of production will _______, and Nissan should _______ its supply.

increase, decrease

Maria is an industrial engineer at a Nissan plant. Indicate how Maria should change her production plans in response to each change in market conditions. Workers unionize and demand a 12% across-the-board raise. As a result, the cost of production will ______, and Nissan should _____ its supply.

perfect competition

Markets in which 1) all firms in an industry sell an identical good; and 2) there are many buyers and sellers, each of whom is small relative to the size of the market.

d) Mary has an inelastic demand for avocados.

Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true? a) All consumers in the market have a high demand for avocados. b) Avocados are in large supply in the market. c) Mary has an elastic demand for avocados. d) Mary has an inelastic demand for avocados.

yes

Movie stars such as Salma Hayeck, Samuel L. Jackson, Dwayne Johnson, and Jennifer Lawrence are paid millions of dollars per movie, which can take as much as 6 months of full-time work for an actor. By contrast, doctors and nurses earn considerably less over the same time period. Why might this be? Does this illustrate a diamond-water paradox?

major film stars, movies featuring these film stars, doctors and nurses

Movie stars such as Salma Hayeck, Samuel L. Jackson, Dwayne Johnson, and Jennifer Lawrence are paid millions of dollars per movie, which can take as much as 6 months of full-time work for an actor. By contrast, doctors and nurses earn considerably less over the same time period. Why might this be? While the supply of _______ is small and relatively fixed in the short run, the demand for _________ is quite large globally. By contrast, the marginal benefit of the services provided by _______is relatively low, although the total benefit is quite high.

a) less; $150

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week. a) less; $150 b) greater; $150 c) greater; $75 d) less; $75

a) scarcity.

Opportunity cost arises from the fundamental economic problem of a) scarcity. b) unlimited resources. c) interdependence. d) marginal costs.

shortages, below

Price ceilings create ________ if they are set _______ the equilibrium price.

positive feedback

Price elasticity of supply is ALWAYS _______ because supply slopes upward

a) sellers are to price changes.

Price elasticity of supply measures how responsive: a) sellers are to price changes. b) buyers are to price changes. c) sellers are to changes in the prices of competing goods. d) sellers are to changes in cost of production.

surpluses, above

Price floors create _______ if they are set _______ the equilibrium price.

revenue

Price x Quantity

Percentage change in quantity (midpoint)

Q2-Q1/(Q2+Q1/2)x 100

rational rule for seller in competitive markets

Sell one more item if the price is greater than (or is equal to) the marginal cost.

c) supply is more elastic relative to demand.

Sellers bear a smaller incidence of a tax when: a) demand is perfectly inelastic. b) demand is more elastic relative to supply. c) supply is more elastic relative to demand. d) the tax is higher.

production possibility frontier

Shows the different sets of output that are attainable with your scarce resources.

d) the amount of tofu she needs in order to consume one less unit of peanut butter while remaining just as well of

Suppose Martha consumes tofu and peanut butter. Which describes Martha's marginal rate of substitution for tofu and peanut butter? a) the consumption bundle of tofu and peanut butter that yields the greatest satisfaction b) the change in how much tofu and peanut butter she can purchase if her income changes c) how much tofu and peanut butter she can purchase if prices change d) the amount of tofu she needs in order to consume one less unit of peanut butter while remaining just as well of

d) You can charge a higher price per pumpkin.

Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers will want to buy many pumpkins to decorate their houses and make pumpkin pies. Which of the following is a likely result of this scenario? a) You will wind up with many unsold pumpkins. b) You will be able to sell only the highest-quality pumpkins. c) You will take fewer pumpkins to the market to sell. d) You can charge a higher price per pumpkin.

C, E, B, D, A

The graph depicts five demand curves. Please rank each curve in terms of elasticity. A curve that is more elastic than another curve for any given quantity can be considered more elastic. Rank the lines from most to least elastic.

d) It is the amount of an item that a seller is willing to sell at a particular price.

What is quantity supplied? a) It is the amount of an item that a buyer is willing to buy at a particular price. b) It is a graph that plots the quantities of an item that a seller plans to sell at different prices. c) It is a graph that plots how much a seller produces at different points in time. d) It is the amount of an item that a seller is willing to sell at a particular price.

b) 300 units

What is the equilibrium quantity in this market? a) 100 units b) 300 units c) 330 units d) 240 units

price elasticity of supply >1

What is the price of elasticity of supply if there's elastic supply?

price elasticity of supply <1

What is the price of elasticity of supply if there's inelastic supply?

price elasticity of supply = infinity

What is the price of elasticity of supply if there's perfectly elastic supply?

price of elasticity =0

What is the price of elasticity of supply if there's perfectly inelastic supply?

normal good with elastic income

When income elasticity of demand is greater than 1 and positive there is a?

A, B, and C

Which of the following are quantity regulations? a) zoning laws b) health insurance mandates c) taxi quotas d) rent control

b) When demand is elastic and price falls, total revenue rises.

Which statement best characterizes the relationship between the elasticity of demand, price, and total revenue? a) When demand is inelastic and price falls, total revenue does not change. b) When demand is elastic and price falls, total revenue rises. c) When demand is elastic and price falls, total revenue falls. d) When demand is inelastic and price falls, total revenue rises.

a) The face value is below the equilibrium price because the rate in the secondary market exceeds the face value.

You purchased a ticket to the musical Hamilton through a verified reseller for $457.00. When your ticket arrives, you see that the face value printed on it is $259.00. Which of the following is correct? a) The face value is below the equilibrium price because the rate in the secondary market exceeds the face value. b) The rate in the secondary market is above the equilibrium price because it exceeds the face value. c) The rate in the secondary market is below the equilibrium price because it falls below the face value. d) The face value is above the equilibrium price because the rate in the secondary market is below the face value.

the building blocks of economics

basics of economics, supply and demand, market equilibrium, elasticity, market organizations, market failures,

benefit

buyers have a declining marginal?

marginal cost equation

change in total cost / change in quantity

determinants of the market demand for a good

consumer preference, income, expectations about the future, prices of related goods, congestion and network effects, market size

elastic

describes demand that is very sensitive to a change in price; greater than 1

rent control policies

establish a maximum price for rent

total cost equation

fixed cost + variable cost

income

money received, especially on a regular basis, for work or through investments.

change in quantity demanded

movement along the demand curve showing that a different quantity is purchased in response to a change in price

complements

negative price relationship, buys less when other prices rise

substitutes

positive price relationship, buys more when other prices rises

price mechanism

price signals which determines allocation of resources through interaction of supply and demand

role of prices

prices as regulators, the invisible hand, and the allocation of resources

determinants of elasticity of supply

resource substitution possibilities, time horizon, how flexible businesses can be

consumer preferences

the personal likes and dislikes that make buyers more or less inclined to purchase a good

equilibrium quantity

the quantity demanded and supplied in equilibrium.

rare and common inputs

what are resource substitution possibilities?

revenue that funds government programs and a method of changing market incentives

what are the two main purposes of a tax?

momentary, short run, & long run response

what are time horizons?

elastic supply

what do common inputs have?

cross price of elasticity of demand average

∆QAD/%∆PB=∆QA/∆PB x average PB/average QA

shift in the supply curve

A movement of the supply curve itself.

d) the maximum price that a seller can charge in a market.

A price ceiling is: a) the minimum price that a seller can charge in a market. b) the average price that a seller can charge in a market. c) any price above the equilibrium price. d) the maximum price that a seller can charge in a market.

movement along the demand curve

A price change causes movement from one point on a fixed demand curve to another point on the same curve.

d) demand will decrease

In each of the following scenarios, the market is initially in equilibrium. c. A heat wave in Las Vegas causes tourists to cancel their hotel room reservations and vacation elsewhere. 1. Which of the following will occur in the market for Las Vegas hotel rooms? a) supply will increase b) demand will increase c) supply will decrease d) demand will decrease

pure market economy

Market forces of supply and demand allocate resources to the price mechanism; Focus on efficiency

change in the quantity demanded

The change in quantity associated with movement along a fixed demand curve.

change in the quantity supplied

The change in quantity associated with movement along a fixed supply curve.

communism

The community owns the means of production and makes joint decisions about its use

variable, should

The cost of the seats that are installed in each aircraft is a ______ cost for Boeing. The cost of the seats _____ be included in the opportunity cost of producing an additional aircraft.

marginal benefit

The extra benefit from one extra unit (of goods purchased, hours studied, etc.).

marginal cost

The extra cost from one extra unit.

marginal product

The increase in output that arises from an additional unit of an input, like labor.

d) The quantity supplied in the market falls by 149,000.

There are four suppliers in the packed meals market. The quantity of packed meals that each one is willing to supply per week at various prices is provided in the accompanying table. What is the change in the market supply for packed meals when the price falls from $6.25 per meal to $6.00 per meal? a) The quantity supplied in the market falls by 165,000. b) The quantity supplied in the market rises by 152,000. c) The quantity supplied in the market rises by 149,000. d) The quantity supplied in the market falls by 149,000.

c) The quantity supplied in the market rises by 152,000.

There are four suppliers in the packed meals market. The quantity of packed meals that each one is willing to supply per week at various prices is provided in the accompanying table. What is the change in the market supply for packed meals when the price rises from $6.25 per meal to $6.50 per meal? a) The quantity supplied in the market falls by 165,000. b) The quantity supplied in the market falls by 132,000. c) The quantity supplied in the market rises by 152,000. d) The quantity supplied in the market rises by 132,000.

complements, increase

When Sony released the PlayStation 4, it was reported that Sony was taking a loss of $60 on every PS4. However, Sony expected to make this up with sales of PS+ subscriptions and increased royalties from video games. Use the interdependence principle to help explain this strategy. The PS+ subscriptions allow PS4 owners to play their games online, receive new games monthly to download at no charge and receive additional special discounts on other items. Therefore, the PS4 and PS+ subscriptions are ______ in consumption. Decreasing the price of the PS4 will ______ the demand for PS+ subscriptions. Sony expects that revenue from recurring PS+ subscriptions will be larger than the loss in revenue from PS4 sales.

subsidies

a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.

all factors

if production is long-term, how many factors are variables?

at least one

if production is short-term, how many factors are variables?

normal good and income elastic

income elasticity of demand when it's positive and greater than 1 is?

normal good and income inelastic

income elasticity of demand when it's positive less than 1 but greater than 0?

utility properties

increases with more consumption, and increasing as a decreasing rate with each unit consumed

decreasing opportunity cost

what never happens with the PPF?

MR=MC

when is revenue maximized?

parallel shift

when resources change how does the PPF change?

changes the slope

when technology change how does the PPF change?

negative marginal utility

when the consumption of an additional unit of a good or service makes a person worse off

diminishing marginal utility

when the consumption of an additional unit of a good or service provides the person with a smaller increase in satisfaction than previous units

complements

when the cross of elasticity of demand is negative and less than 0 than its?

substitute

when the cross of elasticity of demand is positive and greater than 0 than its?

both

who is the economic burden on buyers or sellers?

buyers

who is the tax on?

sellers

who is the tax on?

when the price goes up 1%, the quantity goes down by more than 1%

will revenue go up or down when price is elastic

when the price goes up 1% quantity goes down less than 1%

will revenue go up or down when price is inelastic?

when the price goes up 1% quantity goes down 1%

will revenue go up or down when price is unit elastic?

a) Graph A

(Figure: Market for Coffee) A coffee shop opens next to an existing coffee shop. Which of the following graphs shows the effect of this new coffee shop on the market supply curve for coffee in this area? a) Graph A b) Graph D c) Graph B d) Graph C

c) 200 units

(Figure: Spice King Burgers' Supply Curve) Take a look at Spice King Burgers' supply curve for burgers. How many burgers will they supply at a market price of $1.50 per burger? a) 500 units b) 300 units c) 200 units d) 400 units

b) The market price will fall.

A binding price floor in a market is removed. Which of the following is likely to occur as a result? a) The supply of the item will rise. b) The market price will fall. c) The market price will rise. d) The demand for the item will fall.

b) always above the equilibrium price.

A binding price floor is: a) the maximum price that a seller can charge in a market. b) always above the equilibrium price. c) always below the equilibrium price. d) always at the equilibrium price.

mixed economy

A combination of market forces and central authority allocates resources; Try to balance efficiency and equity

c) multiply the individual supply of one of the suppliers by ten.

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: a) take the individual supply of one supplier. b) take one-tenth of the individual supply of each supplier and add it up. c) multiply the individual supply of one of the suppliers by ten. d) find the average quantity produced by the ten suppliers.

price ceiling

A maximum price that sellers can charge.

inferior goods

A good for which higher income causes a decrease in demand.

normal goods

A good for which higher income causes an increase in demand.

market demand curve

A graph plotting the total quantity of an item demanded by the entire market, at each price.

market supply curve

A graph plotting the total quantity of an item supplied by the entire market, at each price.

sales tax

A tax on a sale of merchandise or services

shift in the demand curve

A movement of the demand curve itself.

subsidy

A payment made by the government to those who make a specific choice.

binding price ceiling

A price ceiling that prevents the market from reaching the market equilibrium price, meaning that the highest price sellers can charge is set below the equilibrium price.

movement along the supply curve

A price change causes movement from one point on a fixed supply curve to another point on the same curve.

binding price floor

A price floor that prevents the market from reaching the equilibrium price, meaning that the lowest price that sellers can charge is above the equilibrium price.

a) minimum or maximum quantity that can be sold.

A quantity regulation is a: a) minimum or maximum quantity that can be sold. b) limit on the number of consumers allowed in a market. c) minimum or maximum price that can be charged. d) limit on how many firms can operate in a market.

falls short of

A quota will impact the market if the maximum quantity it allows _______ the equilibrium quantity.

mandate

A requirement to buy or sell a minimum amount of a good.

market

A setting bringing together potential buyers and sellers.

decrease in demand

A shift of the demand curve to the left.

increase in demand

A shift of the demand curve to the right.

decrease in supply

A shift of the supply curve to the left.

increase in supply

A shift of the supply curve to the right.

quantity demanded (at a given price)

A specific amount of a specific price

a) demand curve to the right.

A subsidy for buyers of a product shifts the: a) demand curve to the right. b) demand curve to the left. c) supply curve to the right. d) supply curve to the left.

b) a government payment designed to encourage particular purchases or productive activities.

A subsidy is a: a) a tax designed to encourage particular purchases or productive activities. b) a government payment designed to encourage particular purchases or productive activities. c) form of tax. d) government regulation of the quantity sold in a market.

a) (i), (ii), and (iii)

A tax on buyers causes which of the following?(i) a leftward shift of the demand curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay a) (i), (ii), and (iii) b) (ii) and (iii) c) (i) and (iii) d) only (i)

d) (i), (ii), and (iii)

A tax on sellers causes which of the following?(i) a leftward shift of the supply curve(ii) a decrease in quantity sold(iii) an increase in the price buyers pay a) (ii) and (iii) b) only (i) c) (i) and (iii) d) (i), (ii), and (iii)

d) supply curve to the left.

A tax on sellers shifts the: a) demand curve to the right. b) supply curve to the right. c) demand curve to the left. d) supply curve to the left.

substitutes in production

Alternative uses of your resources. Your supply of a good will decrease if the price of a substitute-in-production rises.

attainability

Ability to provide the minimum essential supplies and services required to begin combat operations

2.6

According to the U.S. Department of Energy, the average price of gasoline in the U.S. fell by 14% in 2015. The number of hybrid electric vehicles (HEV) sold in the U.S. fell by 36% in the same year. Calculate the cross-price elasticity of demand for HEVs and gasoline. Round answer to one place after the decimal. a. Cross-price elasticity =

substitutes

According to the U.S. Department of Energy, the average price of gasoline in the U.S. fell by 14% in 2015. The number of hybrid electric vehicles (HEV) sold in the U.S. fell by 36% in the same year. Calculate the cross-price elasticity of demand for HEVs and gasoline. Round answer to one place after the decimal. b. Based on your answer in part a, gasoline and HEVs are:

a) fall, due to a rise in supply

As a result of technological innovation, automated water pumps are being installed on the farms of Kenyan tomato farmers. As a result of the increased use of automated water pumps, the equilibrium price of tomatoes will: a) fall, due to a rise in supply. b) fall, due to a fall in demand. c) rise, due to a fall in supply. d) rise, due to a rise in demand.

planned economies

Centralized decisions are made about what is produced, how, by whom, and who gets what.

inelastic

Describes demand that is not very sensitive to a change in price; less than 1

d) relatively steep.

If an item is a necessity rather than a luxury, its demand curve will be: a) relatively flat. b) perfectly elastic. c) perfectly inelastic. d) relatively steep.

a) inelastic; higher

If demand is _____, a higher price yields _____ total revenue. a) inelastic; higher b) inelastic; lower c) elastic; no change in d) elastic; higher

c) 0.5.

If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is: a) 2. b) -2. c) 0.5. d) -0.5.

150, four hundred

If the government imposes a minimum wage of $10, the equilibrium number of workers employed will be ______. _______ workers will be unemployed.

350, zero

If the government imposes a minimum wage of $4, the equilibrium quantity of workers employed will be _______. _____ workers will be unemployed.

-8.5, complements

If the price of Product E decreasing by2% causes its quantity demanded to increase by 14% and the quantity demanded for Product F to increase by 17%, what is the cross-price elasticity of demand? What is the relationship between these goods. Round your answer to one decimal place.

c) surplus, fall

In each of the following scenarios, the market is initially in equilibrium. c. A heat wave in Las Vegas causes tourists to cancel their hotel room reservations and vacation elsewhere. 2. Will the heat wave result in a shortage or surplus of Las Vegas hotel rooms at the previous price? Will the price of hotel rooms rise or fall? a) surplus, rise b) shortage, rise c) surplus, fall d) shortage, fall

a) supply will decrease

In each of the following scenarios, the market is initially in equilibrium. Determine the impact each event would have on the given market. Suppose General Electric, one of the largest suppliers of light bulbs, decides to discontinue its production of light bulbs. 1. Which of the following will occur in the market for light bulbs? a) supply will decrease b) demand will decrease c) supply will increase d) demand will increase

d) shortage, rise

In each of the following scenarios, the market is initially in equilibrium. Determine the impact each event would have on the given market. Suppose General Electric, one of the largest suppliers of light bulbs, decides to discontinue its production of light bulbs. 2. Will General Electric's exit from the light bulb market result in a shortage or surplus of light bulbs at the previous price? Will the price of light bulbs rise or fall? a) shortage, fall b) surplus, rise c) surplus, fall d) shortage, rise

b) supply will increase

In each of the following scenarios, the market is initially in equilibrium. Determine the impact each event would have on the given market. a. New advances in recycling technology reduce the cost of producing paper made from recycled material. 1. Which of the following will occur in the market for paper made from recycled material? a) demand will increase b) supply will increase c) supply will decrease d) demand will decrease

c) The economic burden of this tax is greater on the buyer.

Refer to the figure which shows the market for electrical components. Which of the following statements is correct? a) There is no statutory burden for this tax. b) The economic burden of this tax is greater on the seller. c) The economic burden of this tax is greater on the buyer. d) The economic burden of this tax is being split equally between buyer and seller.

d) The incidence of this tax is greater on the seller.

Refer to the figure which shows the market for timber. Which of the following statements is correct? a) The incidence of this tax is greater on the buyer. b) The incidence of the tax on the buyer is 10% and on the seller is 90%. c) The incidence of this tax is 50% on the buyer and 50% on the seller. d) The incidence of this tax is greater on the seller.

$5, 24

The U.S. government provides subsidies for a variety of agricultural products. Suppose the demand for and supply of corn is as indicated in the accompanying graph. In the absence of government involvement in the market, the equilibrium price is _____ per bushel, and the equilibrium quantity is _____ billion bushels.

0.1764

The graph shows the linear daily demand curve for Poblano Burritos in Collegeville. Use the graph to answer the questions. Round the final answers to at least two decimal places. Calculate the absolute value of the price elasticity of demand (𝜖D)(ϵD) between points C and D using the midpoint method.

d) more elastic.

Suppose the price of gasoline rises. As time passes, people adjust to the higher price, and the demand for gasoline becomes: a) steeper. b) higher. c) more inelastic. d) more elastic.

false

T/F: bundle A produces more utility than any other bundle

true

T/F: bundle D produces the same utility as bundle A

false

T/F: bundle D produces the same utility as bundle B

false

T/F: bundle D produces the same utility as bundle c

true

T/F: bundle c produces less utility than bundle A

false

T/F: necessities have perfectly inelastic demand?

false

T/F: when something is free, it has perfectly elastic demand?

d) remove the ability to tell whether the product is an inferior good or a normal good.

Taking the absolute value of the income elasticity of demand is incorrect because it would: a) cause the value of the cross-price elasticity of demand to become smaller. b) cause the value of the cross-price elasticity of demand to become zero. c) remove the ability to tell whether the two products have inelastic demand or elastic demand. d) remove the ability to tell whether the product is an inferior good or a normal good.

2.83

The Acmeville Metropolitan Bus Service currently charges $0.77 for an all-day ticket and is used by an average of 472 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must, therefore, find a way to increase revenues. The bus company is considering increasing the ticket price to $0.88. The marketing department's studies indicate this price increase would reduce usage to 322 riders per day. Calculate the price elasticity of demand using the midpoint method for bus tickets to determine if the bus company should increase price or decrease price to increase revenues. Enter your answer as an absolute value and round it to two places after the decimal. price elasticity of demand:

b) greater than or equal to the marginal cost.

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is: a) greater than or equal to the marginal benefit. b) greater than or equal to the marginal cost. c) less than the marginal cost. d) less than the marginal benefit.

c) (i), (ii), and (iii)

The United Kingdom plans to end the use of gas-powered and diesel-powered cars by the year 2040. At the same time, car manufacturers, such as General Motors and Nissan, are increasing the number of electric car models they produce. Based on this information, which of the following statements is/are correct?(i) If the quantity of new electric cars supplied is greater than the quantity demanded, then the price of electric cars will fall in the future.(ii) The demand for gasoline will fall in the future.(iii) The demand for electricity will rise in the future.(iv) The demand for diesel will rise in the future. a) (ii) and (iv) b) (i) and (ii) c) (i), (ii), and (iii) d) only (i)

c) marginal principle

The __________ suggests that decisions about quantities are best made incrementally. a) cost-benefit principle b) opportunity cost principle c) marginal principle d) interdependence principle

there would be a shortage, exceeds

The average price of gasoline is $3.25 per gallon in your town. At a price of $0.50 per gallon, ________ as the amount of gasoline people are willing and able to buy _______ the amount of gasoline gas stations are willing and able to sell.

b) costs and benefits

The cost-benefit principle states that _____ are the incentives that shape decisions. a) incomes b) costs and benefits c) framing effects d) opportunity costs

a) demand for one good is to a change in the price of another good.

The cross-price elasticity of demand measures how responsive the: a) demand for one good is to a change in the price of another good. b) price of a good is to a change in the price of another good. c) demand for one good is to a change in the demand for another good. d) supply of one good is to a change in the price of another good.

demand

The entire relationship between price and quantity for a good; A set of prices/quantities that consumers are willing to buy

supply

The entire relationship between price and quantity for a good; A set of prices/quantities that firms are willing to off

changes in supply

The entire relationship between price and quantity for a good; A set of prices/quantities that firms are willing to offer

a) between 1 and 5

The first graph represents a total revenue curve for Marilyn's Magnificent Coiffures. Use the information from the total revenue curve to move the five points on the second graph to plot the corresponding demand curve. Demand is elastic when quantity is a) between 1 and 5 b) 1 c) between 1 and 9 d) 9 e) 5 f) between 5 and 9

2

The graph shows the budget line for a consumer who only buys cookies and magazines. If the consumer's income is $20, what is the price of a Magazine?

1

The graph shows the budget line for a consumer who only buys cookies and magazines. If the consumer's income is $20, what is the price of a cookie?

5.6

The graph shows the linear daily demand curve for Poblano Burritos in Collegeville. Use the graph to answer the questions. Round the final answers to at least two decimal places. Calculate the absolute value of the price elasticity of demand (𝜖D)(ϵD) between points A and B using the midpoint method.

-0.01

The graph shows the linear daily demand curve for Poblano Burritos in Collegeville. Use the graph to answer the questions. Round the final answers to at least two decimal places. Calculate the slope between points A and B

-0.01

The graph shows the linear daily demand curve for Poblano Burritos in Collegeville. Use the graph to answer the questions. Round the final answers to at least two decimal places. Calculate the slope between points C and D

a) constant

The graph shows the production possibility frontier for a country that can use it's resources to make either bread or steel. According to the graph, the opportunity cost of shifting reasources from making bread to making steel is ____________. a) constant b) decreasing c) increasing

d) A; B; C

The graph shows the production possibility frontier for a country that can use it's resources to make either bread or steel. Point ____ is attainable but inefficient. Point ____ is attainable and efficient. Point ____ is unattainable. a) B; A; C b) B; C; A c) A; C; B d) A; B; C

b)both financial and nonfinancial

The key to using the cost-benefit principle is to think about _____ aspects of a decision. a) neither financial nor nonfinancial b)both financial and nonfinancial c) only financial d) only nonfinancial

variable, should

The labor used to produce the aircraft is a _________ cost for Boeing. Labor costs _______ be included in the opportunity cost of producing an additional aircraft.

c) decreases.

The law of diminishing marginal utility means that that as person receives more of a good, the added utility from each additional unit a) increases. b) is negative. c) decreases. d) stays the same.

fixed, should not

The manufacturing plant used to produce aircraft is a _______ cost for Boeing. The cost of the manufacturing plant ______ be included in the opportunity cost of producing an additional aircraft.

b) the additional cost of hiring one more worker.

The marginal cost of an additional worker is a) always equal to the cost from the first worker hired. b) the additional cost of hiring one more worker. c) the total cost of all workers hired. d) always equal to the benefit of hiring the additional worker.

b) whether to do a bit more of an activity or a bit less of it.

The marginal principle helps individuals decide: a) whether to live on the margins of society. b) whether to do a bit more of an activity or a bit less of it. c) whether to attend a university or not. d) how large a down payment to make when buying a new house.

diminishing marginal product

The marginal product of an input declines as you use more of that input.

$300

The market for used IPads is described by Qd=1000−2PQd=1000−2P and Qs=0.5P+250Qs=0.5P+250 . What is the equilibrium price in this market?

400

The market for used IPads is described by Qd=1000−2PQd=1000−2P and Qs=0.5P+250Qs=0.5P+250 . What is the equilibrium quantity?

d) the value of the next best alternative given up to acquire the good.

The opportunity cost of a good is: a) smaller during periods of economic recession. b) equal to the monetary cost of the good. c) larger during economic booms. d) the value of the next best alternative given up to acquire the good.

d) potential income that could be earned working.

The opportunity costs of attending college include the: a) cost of room and board. b) cost of clothes to wear at school. c) effort and hard work. d) potential income that could be earned working.

efficiency

The percentage of the input work that is converted to output work

equilibrium

The point at which there is no tendency for change. A market is in ______ when the quantity supplied equals the quantity demanded.

equilibrium price

The price at which the market is in equilibrium.

a) perfectly inelastic.

The price elasticity of demand for a good with a vertical demand curve is: a) perfectly inelastic. b) perfectly elastic. c) elastic. d) inelastic.

b) 2.7

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs? a) 2 b) 2.7 c) 0.37 d) 0.5

c) 2.

The price of cakes rises by 15%. In response, the quantity supplied of cakes rises by 30%. The price elasticity of supply for cakes is: a) -0.5. b) 0.5. c) 2. d) 0.33.

d) 0.5.

The price of gluten-free buns falls by 7%. In response, the quantity supplied of gluten-free buns falls by 3.5%. The price elasticity of supply for gluten-free buns is: a) 0.33. b) 2. c) -0.5. d) 0.5.

c) 0.67

The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk? a) -1.5 b) -0.67 c) 0.67 d) 1.5

b) 0.4; inelastic

The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____. a) 0.4; elastic b) 0.4; inelastic c) 2.5; elastic d) 2.5; inelastic

c) -1.33; complements

The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____. a) 1.25; complements b) -0.75; substitutes c) -1.33; complements d) -1.25; complements

b) 2; substitutes

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____. a) -2; substitutes b) 2; substitutes c) 0.5; substitutes d) 1.5; complements

scarcity

The problem that resources are limited.

d) The ratio of the percent change in quantity demanded to the percent change in price.

Which statement is the best definition of the price elasticity of demand? a)The ratio of the percent change in demand to the percent change in income. b) The ratio of the percent change in price to the percent change in quantity demanded. c) The absolute value of the slope of the demand curve. d) The ratio of the percent change in quantity demanded to the percent change in price.

a) They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

Why are supply curves typically upward-sloping? a) They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services. b) They slope upward because sellers demand more when prices are lower. c) They slope upward because sellers prefer to sell more when prices are lower. d) They slope upward due to the law of demand.

c) go; greater

You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should ____ to dinner with your friend because the benefit of doing so is _____ than the cost. a) go; less b) not go; less c) go; greater d) not go; greater

a) shampoo

You are given data on four products — toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand? a) shampoo b) toothpaste c) laundry detergent d) soap

a) The supply of cacao beans, used to produce chocolate, has fallen around the world.

You eat M&Ms every day. When you go to the store to buy some, you find that M&Ms are more expensive than they were last month. Which of the following could explain why M&Ms are more expensive? a) The supply of cacao beans, used to produce chocolate, has fallen around the world. b) A new study finds that the benefits of eating chocolate are not as great as previously thought. c) A new robot has been installed at the Mars chocolate company that reduces the time needed to produce M&Ms by half. d) Consumers are now purchasing fewer M&Ms compared to other types of chocolates.

substitutes, large

You may have observed that items such as different brands of aspirin, tomato sauce, or gasoline are typically priced the same as each other. This is particularly true when consumers can find these goods in close proximity to each other. For example, prices are often the same at gas stations that are on opposite sides of the street. Prices are also generally the same for products next to each other on the same grocery store shelf. The aforementioned examples are goods that are likely to be ______. You would expect the value of the cross-price elasticity to be ______, because the opportunity cost of getting information on price is low.

interdependence principle

Your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future. When any of these factors changes, your best choice might change.

indifference curve

a curve on a graph (the axes of which represent quantities of two commodities) linking those combinations of quantities which the consumer regards as of equal value.

utility

as indifference curves move outwards they provide more what?

resource availability and time constraints

ability to store products as inventory, availability of inputs, capacity to expand production, the ability of suppliers to enter and exit the market, time to adjust to production going up or down

accounting cost

actual expenses plus depreciation charges for capital equipment

determinants of price elasticity of demand reflecting on opportunity costs

availability of completing products, specific product vs broad categories, ability to search for alternates, time to adjust consumption decisions, necessities, share of consumer income

marginal decision making

comparison of additional benefits of a choice against the additional costs it would bring, without considering related benefits and costs of past choices

producer theory

characterizes producers' or sellers' choices in a systematic way

mostly decreasing

output is increasing at what rate?

fixed cost equation

total cost - variable cost

profit

total revenue minus total cost

resources and technology changes

what can change the PPF?

inelastic supply

what do rare inputs have?

make it more elastic

what do these do to elasticity of demand?: more substitution possibilities , more time to adjust consumption decisions, not a necessity , larger share of consumer income

make it more inelastic

what do these do to the elasticity of demand?: fewer substitution possibilities, less time to adjust consumption decisions, is a necessity, smaller share of consumer income

money and the stock market

what is scarcity not about?

lower prices and increase market quantity

what is the goal of a subsidy?

the law of diminishing marginal product

what is the short-run technology constraint between inputs and outputs?